The general purpose of this cooperative project is to carry out a micro-level based investigation of the evolution and functioning of rural market institutions in China. Questions regarding both individual and aggregate household behavior within newly- established rural markets will be addressed through the analysis of data gathered in a multi-purpose household-level survey that will be modeled after the World Bank's Living Standard Measurement Study (LSMS) survey. This household-level survey, which will be undertaken in the provinces of Hebel and Liaoning, will be carried out in the Spring of 1993, and will extend to between 1200-1500 households in 24 villages. This project will contribute to our understanding of the complexities involved in economic institutional change through providing a case study of household decision-making amidst China's recent rural economic reforms. Intended contributions are several: First, the project will help to identify those factors at the local level in China that are presently impeding an expansion in the role of product and factor markets in resource allocation, and provide estimates of the resulting inefficiency. Second, with elasticities obtained from the construction of an agricultural household model, the implications of alternative price and tax policies in the agricultural sector can be investigated, and better policies formulated. Third, drawing on the household and village level data, estimates of the degree of inequality both in consumption and income at the local level can obtained, and sources of the inequality diagnosed. And fourth, drawing on time-series data dating back to the Land Reform, the implications of alternative policies for agriculture's long-term development will be investigated. This kind of analysis will not only help to resolve lingering questions relating to the impact of rural reforms on productivity and growth but will be of much wider interest now that Eastern Europe and the Soviet Union are embarking on similar paths.
